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MTN Group reportedly in talks to acquire Tata Teleservices

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South African telecom major MTN Group is in talks to acquire Tata Teleservices (TTSL) and Tata Teleservices Maharashtra (TTML), reports Hindustan Times citing sources.

Sources told the publication that the discussion is still in early stages. The report also quotes an undisclosed corporate lawyer who had apparently advised Tata during the DoCoMo stake sale who mentioned that Tata Group had held two rounds of preliminary discussion with MTN recently.

MTN and Tata Sons spokespersons however declined to comment on this to the publication, providing a boilerplate response: “We do not comment on such speculation”.

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It’s worth noting that Vodafone was earlier rumored to be in talks to acquire both the companies from Tata Group, enabling the latter to exit the telecom industry altogether. However, the report says that the talks broke down earlier this year following differences over valuation.

NTT DOCOMO had earlier announced plans of selling its entire 26.5% stake in Tata Teleservices through the equity method by June 2014. The company had an an option to sell its stake for Rs 7,250 crore (about 50% of the acquisition price) or a fair market price, whichever is higher.

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Last month, the company had told Medianama that it plans to exercise this right at the beginning of July. It’s currently not clear whether NTT DOCOMO has already exercised this right or not. We’ve written to NTT DOCOMO on this and will update once we hear back. 

Tata Sons’ investment in Tata DOCOMO

That being said, Tata Sons has apparently pledged shares of its group companies Tata Consultancy Services (TCS), Tata Motors, Tata Steel and Tata Power to raise Rs 7,200 crore in order to buy out NTT DOCOMO’s 26% stake, as indicated a Business Standard report from last month.

Tata Sons has reportedly invested Rs 8,000 crore to Rs 9,000 crore in the company until now, as indicated by a Moneycontrol report which suggests that Tata Group will be investing a further Rs 5,000 crore into the company in the future.

Tata Teleservices which operates mobile services under the Tata DOCOMO brand with its sister company Tata Teleservices Maharashtra Ltd (TTML) has been reeling under losses for several years now. The company’s net worth had reportedly turned negative for the first time last year after incurring a net loss of Rs 4,858 crore on operating income of Rs 10,799 crore for the fiscal FY13. 

Timeline Of MTNs Talks With Indian Carriers

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May 5, 2008: Bharti Airtel announced that it has entered into an exploratory discussion with the MTN Group on May 5, subsequently, on May 6th, denying media reports that it’s put an offer on the table for acquiring MTN.

Airtel reaches an in-principle agreement on May 16, and a term sheet was initiated between the two parties. The agreed term sheet was presented to the MTN Board on May 21, 2008.

May 24, 2008: Bharti withdraws from the talks, following the MTN board presenting a completely different structure to Bharti Airtel. Bharti Airtel sees this new proposal is as a convoluted way of getting indirect control of the proposed combined entity, which would have Bharti Airtel as a subsidiary of MTN.

May 26, 2008: Reliance Communications enters into exclusive merger discussions with MTN.

June 13, 2008: Reliance Communications alleges that Reliance Industries sent a communication to MTN, making a claim of the right of first refusal. Dismisses RILs claims “with the contempt it deserves.”

July 19, 2008: Reliance Communications and MTN formally end talks.

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May 25, 2009: Airtel and MTN Group renew their merger talks and announced that they will discuss potential merger arrangements exclusively till July 31, 2009. As per the agreement, Bharti would acquire a 49% shareholding in MTN, and MTN and its shareholders would acquire an approximate 36% economic interest in Bharti, of which 25% would be held by MTN with the remainder held directly by MTN shareholders. These merger talks were later extended to August 31, 2009 and September 30, 2009.

October 5, 2009: Airtel and MTN Group formally end merger talks since they were not able to obtain a necessary approval by the South African government.

June 2010: Reports of MTN Group resuming merger talks with Reliance Communications, which was later denied by MTN.

June 2013: MTN Group in merger talks with Reliance Communications again, reports The Times Of India. These talks were stalled a month later, as per Bloomberg.

July 2014: MTN Group is in stake sale discussions with three telcos – RCOM, Idea Cellular and Tata Teleservices, according to Moneycontrol. Hindustan Times also says that MTN Group is in talks to acquire Tata Teleservices (TTSL) and Tata Teleservices Maharashtra (TTML).

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